22 February 2011
This week: Animalcare purrs along, Lo-Q moves forward, magnesium hydroxide is a Sirius by-product and Encore soon to repeat
3D Diagnostic Imaging (3DD 6.5p / £11.08m)
This week 3D Diagnostic Imaging, a recent transfer from PLUS to AIM, announced that it had signed an exclusive European distribution deal for its CarieScan hand held device for the early detection and monitoring of tooth decay. The deal is with Orange Dental, a well established and respected European distributor of dental diagnostic and imaging devices, who will distribute the CarieScan product within Germany, Austria and Switzerland. Germany reflects the largest potential European market for the device. The Company also confirmed that it has now shipped its first products into the Canadian market following the signing of its exclusive distribution deal for the Canadian market in August 2010. We look forward to further updates from the Company as these arrangements convert into revenues.
Animalcare Group (ANCR 162.5p / £32.96m)
Animalcare Group, supplier of pharmaceutical and other premium products and services to the veterinary industry, announced results for the 6 months to 31 December 2010. With revenues up by 12 per cent to £5.99m, and a 47 per cent increase in profit before tax to £1.38m, the Company appears to be yielding good results- increasing sales of high margin animal veterinary products underlines these figures, and demonstrates the strength in leadership by Stephen Wildridge, who took position as CEO in April 2010. Going forwards the Company is seeking to repay all borrowings by the end of Q1 2011, and is exploring a strong pipeline of opportunities which it intends to fund through operating cash flows.
Baobab Resources (BAO 22.25p / £37.07m)
Australia-based, UK listed Baobab Resources Ltd is on track to develop Mozambique’s first iron ore deposit, a move which could spur the creation of a steelmaking industry in the country’s central province of Tete, the Company’s Head of Exploration Iain Plews has said: “It is possible that there are ways to get to steel production here in Tete. Thermal power, hydro power and coking coal are in sufficient quantities”. He said the Company could be sitting on a resource base of around 1 billion tons of iron ore once all the exploration has been completed. BAO is prospecting for iron ore in the Tete Basin where several international mining companies are already developing mega coking coal projects for export. A steel industry is still years away and BAO is still in the process of proving that the size of its iron ore discovery is large enough to make it a commercially-viable venture. The Company has already proven that 47.7 million tons of magnetite iron ore exists on a small fraction of its Tete exploration area and it expects that by the middle of this year, it will be able to prove it has at least another 300 million tons of proven resources and possibly as much as 400 million tons to 700 million tons in proven resources. After that the Company will move the project into a feasibility study phase where it plans to outline the best options to develop the project. The presence of cheap hydro-electricity close by and two railway lines means BAO could contemplate processing or beneficiating the iron ore on site and, as mentioned, even build a steel plant. According to Ben James, Baobab’s MD, the iron ore deposit would be commercially viable with an iron ore price of US$70 per metric ton. This compares with The Steel Index recently showing a price of US$191.9 per ton for iron ore fines delivered into China.
Bglobal (BGBL 35.25p / £35.14m)
AIM listed smart metering company announced an agreement with Opus Energy Limited for the supply, installation and servicing of smart meters to Opus’s UK customer base. The agreement also involves the supply of data collection and analytical services to Opus, which in 2010 was awarded Independent Energy Supplier of the Year. A clear demonstration of the expansion path Bglobal continues to follow.
CML Microsystems (CML 196p / £29.30m)
CML, which manufactures semiconductors for storage and communications devices, put out an interim management statement for the period 1 October 2010 to 14 February 2011, which stated that sales revenues are ahead in all key markets and geographies, whilst gross margins and costs remain steady. A co-operation with Toshiba Electronics Europe has produced a storage product which will be sample tested by selected customers during this quarter. This is a positive indicator for the full year results, extending the impressive results for the first 6 months (which we wrote about in November last year), where revenue was up by 56 per cent to £11.21m.
Craneware (CRW 573.5p / £148.91m)
Craneware, the provider of software to US hospitals to improve financial performance, announced the acquisition of a US software company called Claim Trust Inc. for a maximum consideration of $19.5m (initial amount of $9m cash and $6m shares). Claim Trust offers revenue cycle technology solutions to hospitals in the US and reported revenues of $8.5m (EBITDA $0.9m), of which 70 per cent was based on recurring subscriptions. The technology will supplement the existing comprehensive suite that Craneware offers.
Keith Neilson, CEO of Craneware said: “…With the fiscal and regulatory pressures on US hospitals continuing to increase, the addition of Claim Trust’s powerful set of revenue cycle software tools means we can provide our customers with further means of improving the collection of the revenue to which they are entitled.”
Encore Oil (EO. 121p / £354.16m)
EnCore’s partner and operator of the Cladhan discovery, Sterling Resources, has announced that drilling will shortly be resumed with at least one well and a sidetrack. Following last year’s successful drilling, this accelerated appraisal drilling programme is expected to commence as soon as the Transocean Prospect semi-sub rig is in place.
Hutchison China MediTech (HCM 520p / £269.06m)
Chi-Med announced that Mr Johnny Cheng Chig Fung has been appointed as an Executive Director. He has worked in Chi-Med as Chief Financial Officer for over two years. He is a director of Hutchison MediPharma (Hong Kong) Limited and Sen Medicine Company Limited and was a director of Hutchison Healthcare Limited during 2009.
ImmuPharma (IMM 80.5p / £65.63m)
The specialist discovery and development pharmaceutical company announced encouraging results from its ongoing phase I/IIa clinical trial in cancer patients. Around half of the cancer patients that had undergone treatment with ImmuPharma’s drug candidate IPP-204106 are in a stable condition without any other drug treatment.
ImmuPharma has already begun development of the next generation of IPP-204106, the “micro Nucants”. This improved formulation, comprising of small particles of the drug candidate, has shown more impressive efficacy in cancer models. The clinical trial is taking place in two hospitals; one in Paris and one in Dijon, and is expected to complete in the coming months. ImmuPharma hopes to start a Phase IIb programme later this year in patients with glioblastoma (brain tumour), hormone-resistant prostate cancer and pancreatic cancer.
Having now two drug candidates with positive results in clinical trials is a milestone for ImmuPharma. The latest positive results of the clinical trials will put the Company in a good position for further major corporate deals such as the one currently in progress with partner Cephalon on Lupuzor that is now in a large late-stage clinical trial in the United States.
Cephalon on Lupuzor that is now in a large late-stage clinical trial in the United States.
Kalahari Minerals (KAH 252p / £618.47m)
This is the first time we have covered Kalahari, the AIM listed Resource Company with uranium, gold, copper and other base metal interests in Namibia. One of its two major interests is ASX, TSX and NSX listed Extract Resources, a Namibian focused uranium exploration and development company, in which Kalahari has a circa 42 per cent interest. The Board of Kalahari also confirmed that it is holding discussions with Extract to explore options that might simplify the Extract/Kalahari shareholding structure. Extract’s primary asset is its 100 per cent-owned Husab Uranium Project and it has advised that it is currently holding discussions with Rio Tinto around a potential combination of the Husab Uranium Project with the neighbouring Rössing Uranium Mine. Extract estimates that the Husab Uranium project contains one of the fifth largest uranium only deposits in the world. This is worth keeping an eye on as there could be significant potential synergies from a joint development of the two projects.
Lo-Q (LOQ 155.5p / £25.30m)
AIM listed provider of virtual queuing systems for theme parks announced preliminary results for the year to 31 October 2010. These were most encouraging, with a 15.9 per cent increase in revenues to £20.3m, and profit before tax pushing up by 18.4 per cent to £2.32m. Though the results were strong, the Company decided not to pay a dividend for the period, citing potential investment in additive projects as the main reason for holding back.
Lo-q’s QBot handheld device offers a portable system to theme park visitors, which for a fee allows users be prioritised in the queuing system for selected rides at theme parks. Revenue is generated predominantly from a share of the sales of theme park rides sold using the Qbot system, though with a strong suite of patents in place around its IP (which is broadly ranging) Lo-Q is continuing to explore new opportunities- a new water park product called Q-Credits is currently in the works, which enables all guests to avoid standing up in line, and is due for trials in summer 2011.
Max Petroleum (MXP 17.75p / £83.02m)
MXP, an oil and gas exploration and development company focused on Kazakhstan, has announced that it has completed drilling the ALTW-1 exploration well on the West Altykol prospect on Block E. The well reached a total depth of 1,947 metres without encountering producible hydrocarbons and will be plugged and abandoned. The Sun ZJ-30 drilling rig will now be moved to drill the ZMA-ET1 appraisal well, testing Triassic reservoirs in the Zhana Makat Field on Block E.
Motive Television (MTV 0.87p / £11.66m)
AIM listed digital television technology, software and services provider last week announced that its 100 per cent-owned subsidiary Motive Television Services Ltd has signed a Memorandum of Understanding with CME Media Services Ltd., a wholly-owned subsidiary of Central European Media Enterprises Ltd. The MOU outlines the next phase in CME’s evaluation of Motive’s “TV Anytime, Anywhere” technologies following an initial Pilot Test Program with the CME group in Prague, Czech Republic. We continue to believe that the combination of disruptive technologies position Motive as a solution provider that can offer TV Anywhere, anytime to the industry.
One Media Publishing Group (OMPP 2.75p / £1.20m)*
PLUS quoted consolidators and acquirers of music and video rights today announced that it has signed two new music catalogue deals. In two separate deals for an advance payment of USD$5000 and an onward royalty to the artists, One Media has acquired the rights to certain performances by British singing diva Anita Harris and soul funk singer Root Jackson of the band F.B.I. All the tracks will be made available through One Media’s digital partner, The Orchard and will be available to download from approximately 200 music downloading websites, including iTunes, Amazon, Tesco, Spotify, Verizon and eMusic. Michael Infante, Chief Executive of One Media, said: “Two distinctly different catalogues here but never the less both catalogues add breadth to our depth of 60’s and 70’s music and give us a greater offering to our expanding list of repertoire.” OMP certainly has developed the knack of signing new digital content.
Ovoca Gold (OVG 32.5p / £28.73m)
Ovaca has identified another gold/silver target, Zet, on its Rassoshinskaya license in the Magadan. The trench programme has identified 20 veins varying in length from 100 to 1,900 metres, which are between one and four metres wide with grades up to 20 grams per ton gold. Ovaca now plans to drill on Zet to test if the veins extend to depth. Ovoca also announced the appointment of Kenneth Kuchling, as a Non-Executive Director. Mr. Kuchling provides mining consulting services with multiple clients globally.
Plant Health Care (PHC 61p / £32.37m)
Plant Health Care has been quick off the mark to announce its results for the year ended 31 December 2010. The Company emphasised the strategic progress that had been made with important new agreements – with Syngenta Crop Protection, Legacy Seeds and Germains Seed Technology – to advance the Company’s progress towards commercialisation and revenues. Financial results were however disappointing due to the lower than expected sales to the Monsanto Company which had a substantial amount of inventory carried forward from 2009. Cash resources remain strong with current balances of approximately $18 m including approximately $5 m realised by the sale of non-core businesses. We believe plant health technology is an attractive niche as the pressure to improve agricultural productivity to meet increased demand grows and so we continue to follow the Company and its peer group with interest.
Range Resources (RRL 16.25p / £205.24m)
The International oil and gas exploration, development and production company announced along with its Georgian partners, Strait Oil and Gas Ltd and Red Emperor Resources NL that a drilling rig has been secured for the upcoming Georgian drilling program.
The Company entered into an agreement with Edeco Petroleum Services to provide the drilling rig, with operations currently underway on preparing and servicing the rig and associated inventory in readiness for mobilisation, currently scheduled to commence March 2011.
The Company undertook a comprehensive approach in securing the rig, engaging highly experienced drilling project manager First Drill Limited to assist in identifying the most appropriate rig for the proposed Georgian drilling program and to help supervise the program.
This is a significant milestone for the Company, as it paves the way for Range’s first exploration well in Georgia.
Red Rock Resources (RRR 11p / £75.68m)
Last mentioned in the Small Cap Wrap of 15/12/10, RRR, a gold mining and exploration company with projects in Kenya and Colombia plus interests in steel feed, uranium and rare earths, announces that it has finalised drilling programmes to test, validate and extend the current resource targets and to investigate potential further targets. A drill programme to test copper-gold VMS targets will also take place shortly. RRR also announces that the mine at El Limon is operating two shifts and the crushers and conveyors are operating satisfactorily. The ball mill has been running 24 hours a day as have the jig, pumps and other elements of the plant. The material processed has produced 6 g/t and 450 tons of this material is still in the silo waiting processing. The material mined is grading 12-15 g/t and improving but the Company has chosen to process lower grade material first. The Machuca mine is now in operation and initial production is at around 20 tpd with grades of 6 g/t.
Rockhopper Exploration (RKH 249p / £642.52m)
The North Falkland Basin oil and gas exploration company, announced that the 14/10-4 appraisal well was spudded on 19 February. 14/10-4 is the first appraisal well to be drilled on the Sea Lion feature situated on License PL032, which is 100 per cent owned and operated by Rockhopper. 14/10-4 is designed to investigate reservoir and hydrocarbon columns downdip of the Sea Lion 14/10-2 discovery well. The planned Target Depth of circa 3,000 metres will investigate the possibility of deeper sands than those encountered in the Sea Lion discovery well. If the drilling is successful, the Company can look forward to a productive 2011.
Sarantel Group (SLG 1.71p / £6.86m)
Sarantel issued a trading update last week containing mixed news. Sales so far this financial year have been slower than expected due to unexpected internal technical development issues experienced by two major customers and this disappointment has been reflected in the share price. However the Company reported a substantial improvement in customer orders and expects monthly sales for the remainder of the financial year to end September 2011 to be broadly in line with budgeted levels even without orders from these two customers. At these levels we continue to believe in the significant upward potential of the share price on positive news from the Company.
Serabi Mining (SRB 40p / £17.96m)*
AIM-traded gold exploration company last week announced that it has received confirmation from the Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais Renovaveis (IBAMA) that the original penalty of Brazilian Reais 3,597,300 (equivalent to US$2.2m) assessed by IBAMA in June 2010 has been cancelled. IBAMA has assessed a revised penalty of Brazilian Reais 1,500, equivalent to US$903 in respect of the alleged administrative breaches. The Company has accepted and paid this fine. It is great to see this behind the Company now. Serabi has now filed a preliminary prospectus with certain of the securities regulators in Canada as part of its listing process there. The ordinary shares will continue to be listed and traded in the UK on AIM. Drilling activity is on-going at Palito and the Company expects to announce results from each of the nine target drilling areas for each discrete area as soon as it has received and interpreted all results from that area. The Company’s target is to establish a resource of 1.5m ounces (gold equivalent). Investors should be able to continue to look forward to an interesting series of news flow over the foreseeable future.
Sirius Minerals (SXX 14.25p / £125.13m)
Sirius Minerals, the globally diversified potash development group has stated it is analysing the available process routes and the potential value of associated by-products and is “pleased to update” the market on potential by-product opportunities at its York Potash project. One of the key process routes for polyhalite involves the use of anhydrous ammonia to chemically precipitate potassium sulphate. The key by-product produced in that process is Magnesium Hydroxide Mg(OH)2. The market for Mg(OH)2 is increasingly being seen as a viable, in some cases superior, more environmentally sensitive replacement for Caustic Soda (NaOH) within several significant industries. Based on the chemical composition of polyhalite and the process chemistry, up to 0.33 tonnes of Mg(OH)2 could be produced for each tonne of Sulphate of Potash. Initial market investigations suggest that Mg(OH)2 is currently selling for approximately US$500 per tonne. For the York Potash project, this pricing could potentially contribute a significant by-product credit to reduce the operating costs of the project. Significant work will be required to confirm the full extent of the potential that Mg(OH)2 represents and this will be carried out as part of the Project development studies.
Chris Fraser, MD of Sirius commented: “we already believe we have one of the world’s largest deposits of polyhalite. Now, although it is early days, this exciting development could have a significant positive impact on the potential of the York Potash Project. It also further emphasizes Sirius’ focus to sustainability and looking to better, cleaner ways of doing things.”
Solomon Gold (SOLG 29.25p / £82.42m)
The gold and copper explorer active in the Solomon Islands and Australia announced the completion of the first diamond drill hole on the Meriguna Prospect, with encouraging mineralisation and initial assay results from the first 83m of the hole.
Commenting on the recent activity on the Fauro Project, Nicholas Mather, Chief Executive of Solomon Gold plc said: “Solomon Gold is pleased to report the completion of the first diamond drill hole, FDDH001 on the Meriguna Prospect, part of the Fauro Island Project in Solomon Islands to a depth of 625m. Solomon Gold is encouraged by the mineralisation and alteration patterns diagnostic of porphyry systems”. These encouraging results can only bode well for Solomon Gold.
Stellar Diamonds (STEL 9.25p / £12.88m)
The AIM listed diamond E&D Company focused on West Africa, announced its strategic decision to accelerate the development of its hard rock kimberlite projects and provided an update on its alluvial diamond operations. In light of the strong rebound in diamond prices as evidenced by the record diamond prices achieved from the recent sale of diamonds from the Company’s Bomboko project (record average price of $201/ct), the Board concluded that substantial value may be created by focusing on fast tracking the development of its hard rock kimberlite portfolio. These projects include the Droujba kimberlite pipe in Guinea and the Tongo kimberlite dyke in Sierra Leone. If proven economic, these projects have the potential to generate substantial revenues over long mine lives and in turn have the potential to transform the company into a significant diamond production company in Africa.
Tertiary Minerals (TYM 14.62p / £17.33m)
Following the mention in the Small Cap Wrap of 02/02/11 when the Company reported progress on its Storuman fluorspar project in Sweden, TYM now reports positive drilling results for the remaining 32 drill holes from the resource definition drilling programme.
The results show further thick intervals of mineralization at shallow depth suitable for open pit mining, for example Hole 10TS19 shows 15.3 per cent grading fluorspar and Hole 10TS09 shows 11.6 per cent grading. Further, higher grade intervals that may be suitable for mechanized underground mining show gradings up to 21.9 per cent fluorspar. The drilling has confirmed the extension of fluorspar mineralization in both south-east and north-west directions where it is still open along a strike length of 3.7 km. The publication of the maiden 1JORC Mineral Resource Estimate is on track for the end of March 2011.
Touch Group (TOU 1.5p / £2.43m)*
AIM listed Touch Group last week announced that it raised £725,000 at 1.5 pence per share to enhance and extend its digital assets which should speed the development of the Company’s Medical Education and Communications Division and expand its Pharma and Energy Divisions. Current shareholders, Schroder’s, Herald and the chairman, Mr Isaacs and family, and other directors all supported the placing. Vincent Isaacs, Executive Chairman of Touch, stated: “From the basis of a now stable infrastructure, the main assets we have built are an intellectual sales force and technical teams, coupled with a wholly owned world-class library of journals, medical and energy papers, both online and in print. None of these assets are reflected on our balance sheet.” We believe that Touch can look forward with renewed confidence.
*A corporate client of Hybridan LLP
The Hybridan Small Cap Wrap is a weekly review of some of the most interesting small cap stories of the past week. Our review will usually be of those companies whose market capitalisations are less than £50m although we may occasionally cover larger companies
15 February 2011
This week: Bglobal goes national, Medicsight looks to US and Japan, Titan’s strong order book and Angel spreads its wings
Angel Biotech (ABH 0.5p / £13.40m)*
AIM listed biopharmaceutical contract manufacturer last week announced the signing of a 5 year pricing agreement with Materia Medica Holding, a leading pharmaceutical company in Russia. Under the agreement, contract prices between the companies are agreed over the next 5 years. It is Materia Medica’s intention to sign a minimum of three further GMP manufacturing contracts with Angel over the period with a potential cumulative value of over £4.5m.
Last month saw a run of good announcements for Angel. First a positive update on trading for the year ended 31 December 2010, with over £5.3m of new contracts signed in 2010, and the Company already having signed 81 per cent of revenues forecast for 2011. Second a placing raising £1.94m was announced. And third, right at the end of January, the Company announced that it had signed a new contract with Pathfinder Cell Therapy, a company based in Massachusetts, and focused on the development of its Pathfinder Cell Platform in regenerative cell therapies. The contract is to provide pre-GMP services for this novel cell therapy. It is good to see Angel taking advantage of this market opening up in the US and fully imagine under Obama to see Angel benefitting from a new political openness to stem cell therapies and other advanced biologics.
Angel is in the process of increasing its manufacturing capacity as a direct response to the continuing demand for Angel’s products and to help capitalise on growth in the EU and US market. The recent placing should help with that strategy and great to see the announcement of new contracts underpinning this stellar growth.
ANT (ANTP 32p / £7.77m)
Good news for ANT. Humax, one of the world’s largest manufacturers of set top boxes, has launched its new TV portal which uses ANT’s Galio platform. Humax have released updates to all HDR-FOX T2 Freeview HD Set Top boxes across the UK, thereby resulting in a wider reach of ANT related products. Users are now afforded the luxury of having access to content providers such as Flickr, BBC iPlayer, and in the near future, Sky Player. User experiences will provide a clearer indication as to whether the product will gain traction with the wider market, though Humax’s willingness to roll out the product in what is a highly demanding market (the UK) demonstrates some early confidence in the product. We can’t help but admire the innovative steps being taken by ANT to ensure their product really does do what it says on the tin, as well as the highly respectable collaborations it is engaging in, and we certainly look forward to seeing how this company progresses through this dynamic and exciting industry.
Avingtrans (AVG 56.5p / £14.40m)
We write for the first time on Avingtrans, the engineering technology group that serves the aerospace, energy and medical and industrial products markets. Last week the company reported its interim results for the six months ended 30 November 2010 building on the positive trading update issued on 11 January this year. The company attributes the improvement in trading to the global recovery, noting that contracts are with global OEM’s and are not dependent on public sector spending in the UK. The stock has recovered to levels not seen since mid -2008 – reflecting trading that has moved in line with economic conditions – and the announcement of the resumption of the payment of a dividend for the full year should provide further momentum to the share price.
Bglobal (BGBL 31.5p / £31.40m)
The leading provider of smart metering solutions to the energy market announced that it has signed a memorandum of understanding with Samsung C&T Corporation; the Korean based global trading and Investment Company. Under the terms of the MoU, Bglobal and Samsung have agreed to work exclusively with each other in order to provide a fully funded solution for the installation of smart meters across the residential and industrial and commercial sectors in the UK. There are approximately 27 million residential electricity meters in the UK and around 2 million electricity meters in the industrial and commercial sector that will need to be replaced with smart meters. The Government will announce in its Spring Package the technical specification for residential meters and the timescale for the roll out and the relationship with Samsung will mean Bglobal is well placed to play a major role in this market as it develops. It is envisaged that Bglobal and Samsung will establish a joint venture through a special purpose company. Samsung will provide this company with smart meters and will work with Bglobal to secure funding to allow the joint venture to offer a fully funded rental model for the deployment of smart meters by energy suppliers to their residential and commercial customers. This venture will exploit opportunities in energy management and home automation – both of which are enabled through smart metering.
Discovery Metals (DME 84.5p / £368.95m)
Discovery Metals, a copper exploration and development company, has announced that it has mandated a syndicate of banks to provide debt finance for $180m to provide the remaining funding required completing the DME owned Boseto copper project in Botswana. The project is currently under construction and is expected to be completed and commissioned in H1 2012. $105m of the funds will be used for the Boseto processing plant and the balance of $75m for the Boseto mine mobile fleet. In addition to this finance, the syndicate will provide a $25m overrun and working capital facility plus hedging lines for both copper and silver production. The facility will be secured over the Boseto copper project assets and 100 per cent of the shares the Company owns in the project entity. Clearly this finance facility underpins the Boseto project and we look forward to further positive news from Botswana.
Enegi Oil (ENEG 18.25p / £16.03m)
Enegi Oil, an independent oil and gas group, said that Dragon Lance Management Corporation, the Company’s partner in the development of its Newfoundland regional play, has provided an update of operations on the PaP No.1 Garden Hill South well, saying that the results are an indication of improved connectivity between the well bore and the reservoir which, if maintained, would be expected to result in higher achievable production rates. In a separate announcement, ENEG said it has been offered a 100 per cent interest in an Onshore Petroleum Licensing Option to undertake a work programme on areas of interest in the Clare Basin, located onshore Western Ireland and is within the same fault system trend as the prospects and discovery in the Company’s Newfoundland play. The Company believes that the Clare Basin has the potential to contain shale gas with well log analysis indicating the presence of a hot shale area. Should the work programme, identify prospective targets, the Company intends to apply for the relevant Exploration Licenses. The programme is expected to cost up to £500,000.
Frontier Mining (FML 7.12p / £132.59m)
The AIM listed gold and copper E&D Company focused on Kazakhstan, announced the completion by independent consultant Wardell Armstrong International of its updated resource estimation, on the Benkala copper deposit in Kazakhstan. Oxide resource increased by a total of 5.9 per cent of Copper and Sulphide resource increased by a total of 9.2 per cent of Copper. This marks an important stage in Frontier’s development at Benkala, confirming the project’s significant resource endowment and their commitment to the highest technical standards.
Fusion IP (FIP 31.50p/£17.1m)
Magnomatics, a company in Fusion IP’s intellectual property commercialisation portfolio has announced that it has become a key partner on research projects alongside companies such as Siemens, Volkswagen and Fiat. One project called the Integrated Enabling Technologies for Efficient Electrical Mobility will result in a radical new vehicle concept for urban driving, and the other is called Car Multi Propulsion Integrated Power Train which will develop technology for electric vehicles. Both projects will employ Magnomatics’ innovative proprietary technology and the Company expects to generate in excess of £1.4m in revenue from its role in these two projects over the next year. Magnomatics has developed revolutionary contactless, lubricant-free magnetic transmissions and ultra-high-torque electrical machines that offer dramatic new engineering possibilities for a range of applications including wind turbines, hybrid vehicles and marine propulsion systems where high reliability, low maintenance, compactness and high efficiency are critical. Magnomatics is one of several engines powering the Fusion portfolio; a number of other companies are seeing very positive progression which will allow Fusion to record some significant value uplifts. In addition, Fusion’s share price is trading well below net asset value so investors may benefit from appreciation in both.
Gulfsands Petroleum (GPX 329p / £401.06m)
The oil and gas production, E&D Company with activities in Syria, Iraq, Tunisia, Italy and the U.S.A., announced an update on operations in Syria. Testing operations are now complete on the Twaiba-1 exploration well, with recovery of only very high salinity. This well will now be suspended and all the information gathered during the drilling and evaluation operations will be the subject of extensive analysis to determine the likely source of the very high salinity water that appears to be obstructing the flow of any hydrocarbons to surface. Further analysis will be important in continuing the operations of the well.
Lifeline Scientific (LSI 237.5p / £19.80m)
Revenues continued to accelerate at Lifeline’s Organ Recovery Systems business throughout the second half of 2010. In a trading update, Lifeline reports that it expects revenues for the period to come in ahead of market expectations at approximately $23m and that profit before tax is likely to be significantly ahead of expectations due to the high operational leverage. Apparently, not only is the number of LifePorts in use increasing, but the usage and associated disposable sales per unit is also increasing. Lifeline is the world’s leading provider of innovative products and services for organ preservation servicing more than 100 renal transplant centres around the world. The Company’s product development efforts are focused on extending the product line with devices for the preservation of the liver, pancreas, heart and lung of which a liver transporter is the most advanced product.
Lonrho (LONR 18p / £211.34m)
Lonrho announced that it has signed a Sales and Purchase Agreement to acquire the AFEX Group of Companies (‘AFEX’) subject to certain conditions, at Lonrho’s sole discretion, being satisfied. AFEX is a service provider based in Kenya that owns and manages secure accommodation based in Kenya and Juba, Southern Sudan. Lonrho has purchased 100 per cent of AFEX for an initial cash consideration of US$3m. The existing management of AFEX will remain in place to develop and grow the company during the transitional period. AFEX’s main focus of current operations is in supplying secure accommodation in Juba in the Southern Sudan. This infrastructure is in great demand from corporate clients and Government Aid Agencies working in Southern Sudan. For the year ended 31st December 2009, AFEX reported a profit before taxation of US$1.568m. This is a great investment for Lonrho as AFEX brings established access to the rapidly developing Southern Sudan market.
Mariana Resources (MARL 43.25p / £78.50m)
The AIM quoted E&D Company focused in Chile and Argentina, provided a good update on exploration activities across the Company’s portfolio of gold-silver and copper projects in Argentina. Two diamond drilling rigs commenced drilling in the El Nido area at the beginning of 2011 and the first assay results are expected in the next few weeks. El Nido is an area of highly prospective rhyolite domes west of the Calandria Sur and Calandria Norte gold-silver discoveries, located in the eastern sector of the highly prospective Deseado Massif gold-silver province. Drilling results at the Los Amigos Joint Venture gold-silver project indicated a high level low temperature epithermal system at the Gator target with economic potential at depth. Mariana is in the early stages of drilling, but so far so good.
Medicsight (MDST 6p / £9.33m)
Industry leader in the development of Computer-Aided Detection (CAD) and image analysis software, announced that its Chief Executive Officer, Allan Rowley, is to focus entirely on Medicsight as it works towards its anticipated regulatory approvals in the US and Japan. Allan Rowley has resigned as Chief Executive Officer and as a director of MGT Capital Investments Inc. (“MGT”) – the majority shareholder in Medicsight. Whilst there is no guarantee that regulatory approvals will be forthcoming, the Directors of Medicsight believe that as the Company works toward finalising its regulatory approvals in the US and Japan it is well placed for the development and marketing of the Company’s computer-aided detection platform for use in the CT Colonography market post regulatory approval. This recent news will be important for the company’s regulatory approval process. If they gain access to the US and Japanese markets, Medicsight should see a bounce in its share price and valuation.
Monitise (MONI 25.75p / £179.89m)
Monitise, which provides end-to-end solutions that enable banks and their customers to undertake banking transactions via mobile phones, announced interim results for the 6 months to 31 December 2010. Highlights include an impressive 207 per cent increase in revenue to £5.3m, with gross margins improving to 62 per cent (H1 2010: 54 per cent). Whilst the Company’s pre tax losses for the period widened to £8.7m (H1 2010: £6.7m), much of this was apparently as a result of heavy investment into expanding the Company’s range of services into new markets. This should come as little surprise given the volume of contracts it has tendered for and won over the course of the last year across new territories and we expect this to continue going forward. The business model appears most fascinating and well thought, in that Monitise is spreading its operations rapidly in order to capture many infant and growing markets. We would however keep a close eye on how the Company funds future expansion given the falling level of cash on the Company’s balance sheet.
Nostra Terra Oil & Gas (NTOG 0.74p / £11.85m)
Nostra Terra announced that the Agnello number 1 well in the Vintage Hills Prospect in Brazos County, Texas, has been drilled to a total vertical depth of 10,400 feet. The curve into the horizontal leg (the lateral) of the well was successfully completed. The drilling of the horizontal leg is now in progress using modern steering techniques. This is very good news for Nostra in the Successful completion of turn into horizontal leg.
PLUS Markets Group (PMK 2.1p / £8.13m)
AIM listed provider of cash trading and listing services last week said that 18 new companies were admitted in 2010 and that a number of companies were looking to be admitted to the market this year. PLUS Markets Group PLC is the holding company for the PLUS Stock Exchange. The stock exchange, which admitted the same amount of companies a year earlier, said corporate activity grew in the second half of 2010. Rachel Maguire, Business Development Director at PLUS Stock Exchange, said: “despite the tough environment in 2010, companies continued to make the most of their listings, raising funds and making acquisitions.”
Rockhopper Exploration (RKH 278p / £717.35m)
The North Falkland Basin oil and gas exploration company announced that exploration well 14/10-3 located 8 km to the north west of the Sea Lion oil discovery was drilled to a total depth of 2,830m. The well was designed to explore the northern lobe of the sea lion fan feature and is the first well to be drilled in that area. The well encountered good quality reservoir from 2,425m to 2,535m in a sequence of 4 main sandstone intervals. Further technical work will also now be undertaken to determine the likelihood of oil being present elsewhere in the northern Sea Lion lobe and the likely contribution, if any, of this well to any commercial oil development on the Sea Lion feature. The well, which was the first to be drilled in this area, 8 km to the north west of the Sea Lion discovery, is encouraging.
Serabi Mining (SRB 34p / £15.27m)*
AIM-traded gold exploration company last week said that it has now filed a preliminary prospectus with certain of the securities regulators in Canada as part of its listing process there. The ordinary shares will continue to be listed and traded in the UK on AIM. Drilling activity is on-going at Palito and the Company expects to announce results from each of the nine target drilling areas for each discrete area as soon as it has received and interpreted all results from that area. The Company still hopes that first results will be available before the end of the first quarter. The previously announced 8,000 hectare helicopter borne VTEM survey was flown and completed during January and the Company is waiting for the contractor to review, verify and collate the various data files gathered, before being able to pass this information to the Company’s own geophysical consultant for interpretation and correlation with other geological data that the Company holds.
A dual listing should assist in creating greater liquidity in the ordinary shares, which will provide all shareholders with increased flexibility to trade the ordinary shares. The Company’s target is to establish a resource of 1.5m ounces (gold equivalent). Investors should be able to continue to look forward to an interesting series of news flow over the foreseeable future.
Sirius Minerals (SXX 16.75p / £147.08m)
Sirius Minerals, a diversified potash development group has reported good progress at the recently-acquired York Potash Project, including the continued acquisition of mineral rights within the project area. Also, following the receipt of assay results for the Dakota Salts EBY-1 wellbore, the Company has commenced a comprehensive regional geological review in North Dakota. This information is now being modelled with existing seismic data and historical regional oil and gas drilling but the process will take a “number of months” to form conclusions as to what the next steps should be in the ongoing exploration programme.
Stellar Diamonds (STEL 10.25p / £14.27m)
The AIM listed diamond mining and Exploration Company focused on West Africa reported an encouraging initial diamond grade from bulk sampling at the Company’s 100 per cent owned Tongo kimberlite project in eastern Sierra Leone. 90 per cent of diamonds have been classified as gem quality and eight diamonds greater than 1 carat recovered. The predominance of gem quality stones in the diamond population so far observed can only bode well for the future diamond value of this kimberlite body.
Strategic Natural Resources (SNRP 21.5p / £22.38m)
SNRP has announced a share placing with Cooch 1095 Limited to raise just over £1 m. Cooch is a company nominated by SNRP’s Black Economic Empowerment (BEE) partner, Rapitrade 644 (Pty) Ltd in agreement with SNRP’s 74 per cent owned subsidiary, Elitheni Coal (Pty) Ltd. The placing proceeds have already been received by the Company and will be used to fund the continued development and commercialization of the Company’s coal mining assets in the Eastern Cape, RSA. This is in addition to an investment in 10 million shares by Rapitrade announced in January 2011. The Company is currently engaged in advanced discussions with interested parties in connection with an off-take agreement and the Board will make an announcement regarding these discussions upon completion. David Nel, CEO of SNRP said: “We are delighted that Rapitrade, through their appointed nominee, have decided to increase their holding in SNRP.” In addition the Company is looking to strengthen its management team and expects to announce appointments over the coming months.
Surgical Innovations Group (SUN 6.32p / £24.13m)
Surgical is another step closer to gaining traction in the US market with its laparoscopic tools and instruments. The Company has announced a four year contract with Mediflex Surgical Products that will see Surgical’s YelloPort+plus being included in surgical trays in the US. This provides Surgical with “back-door” access to a large number of hospitals in the US and circumvents the direct sales access route where existing supplier relationships have proven to be almost impenetrable. Surgical is in negotiations with other US customers regarding distribution of the Company’s innovative and cost effective instruments in a market worth more than $150m a year.
Titan Europe (TSW 78.25p / £64.93m)
Yesterday Titan Europe, the wheel and undercarriage engineer issued a positive trading update for the full year ending 31 December 2010. Sales for the year are expected to be £355m; approximately £7m ahead of market forecasts. This was attributed to a strong fourth quarter but even more importantly the board reported a strong order book for the early part of 2011. Notwithstanding the name, the company is actively pursuing the diversification of its business including developing further its manufacturing presence in Turkey for Wheels and Brazil and China for Undercarriages. The payment of a dividend was suspended following the amending of bank facilities in 2009 but we will continue to watch the performance of the business with interest.
Toumaz Technology (TMZ 8p / £47.49m)
AIM listed wireless infrastructure technology Company announced last week a strategic investment by a US investor. Dr Patrick Soon Shiong, who has had considerable success in the pharmaceutical sector, having developed and sold two multi-billion dollar companies, is investing in Toumaz’s future though California Capital Equity LLC. The idea for this involves both parties working to bring the Sensium platform to the North American sports scene. Toumaz’s Sensium Plaster provides a complete technology platform to allow operators the ability to monitor the human body continuously, wirelessly, intelligently and at low-cost. With 25 strong patents in place, a thin comfortable and user-friendly packaging and profile, and the use of low power multi-band RF technology for communication the product ticks many of the right boxes for successful products in the sporting world. Dr Shiong is currently head of Abraxis Health, exec director of the Wireless Health Institute and founder of the National Coalition for Health Integration. This high profile collaboration enhances the credibility of the product and its implementation in real world situations- an attractive investment opportunity at current price levels, and very much one for the long haul.
Tower Resources (TRP 5.88p / £60.64m)
The AIM listed oil and gas exploration company, with interests in sub-Saharan Africa, announced that it had raised £4,275,000 before expenses through a placing with institutional and other investors of 90,000,000 new ordinary shares at a price of 4.75p per Placing Share. The Placing was significantly oversubscribed and it is intended that the proceeds of the Placing will be used to increase the Company’s working capital resources and provide the facility to fund near term seismic operations in Uganda. In addition, Tower Resources released an update on its operations in Namibia and Uganda, which contains the following quote from Peter Kingston, Executive Chairman of Tower Resources: “I am delighted that a first well in Namibia, to test the huge potential of the Delta prospect, is now a target for this year. I am also pleased that the final commitment well in Uganda will test a good prospect which could yield material value to shareholders if successful.” Given the recent equity raising and confirmed target well at Namibia, Tower Resources should have a successful quarter in 2011.
Transense Technologies (TRT 5.5p / £7.27m)*
Transense’s subsidiary, Translogik, has joined forces with DURATread, the OTR (Off the Road) and Mining Tyre specialists, to launch the state-of-the art OTR iTRack Asset management system in Latin America. In line with Translogik’s business strategy of forging alliances with major regional mining and off-road companies in order to leverage existing customer networks and accelerate market adoption, Duratread will provide rapid, high quality technical and after-sales support to end-users. The OTR iTrack Tyre Pressure Monitoring System (TPMS) monitors and transmits live, uninterrupted real-time data about individual tyre pressures and temperatures as well as vital vehicle information such as speed, acceleration, braking and route traveled. Tests conducted since the Spring of 2010 on 400 ton dump trucks, have already proven the durability of the system in large mining operations. The benefit to fleet owners is that they get immediate, uninterrupted information in real-time on their computer or mobile phone which means they can act quickly and efficiently to maximise tyre performance, reduce vehicle downtime and increase safety for the vehicle and driver. In a market where tyre prices are rapidly increasing and demand is already exceeding supply, the OTR iTrack Asset Management system will allow companies to make tyres last longer and get a better return on their tyre investment. We imagine that mmanagement would have hoped to have been able to release details of orders from significant customers by now, and the pressure is on, but knowing the management team and the opportunities that have to exist in the market place for this kind of technology, we expect them to come through with flying colours.
*A corporate client of Hybridan LLP
The Hybridan Small Cap Wrap is a weekly review of some of the most interesting small cap stories of the past week. Our review will usually be of those companies whose market capitalisations are less than £50m although we may occasionally cover larger companies.
08 February 2011
This week: A positive diagnosis for 3D, Motive motivates and a pat on the back for Patsystems
3D Diagnostic Imaging (3DD 6.75p / £11.51m)
3D Diagnostics, which owns the protected rights to a technology platform with a number of significant potential commercial products, announced that it was the proud recipient of the ‘Best New life Sciences Company in Scotland’ award at Scottish Enterprise Life Sciences 2011. Having previously won a prestigious US dental industry accolade for the CarrieScan Pro (3D’s handheld device for the early detection and monitoring of tooth decay), the Company is receiving well deserved recognition for its achievements and progress made in the US and Canadian markets. This should help 3D push forwards even more. Diagnosis… positive.
Altona Energy (ANR 12.75p / £53.74m)
AIM listed Australian based energy company last week provided a positive update on progress at the Arckaringa Coal-to-Liquids Project in South Australia. This is specifically for the Bankable Feasibility Study and the implementation of a work programme aimed at evaluating the conversion opportunities for the estimated 7.8bn tonne Arckaringa coal resource, of which 1.287bn tonnes are currently JORC complaint. We write on Altona for the first time and await news on the completion of reports that will underpin the design of the field drilling programmes by April 2011, and of starting the field programmes in mid 2011.
Amur Minerals Corporation (AMC 18p / £45.07m)*
AIM listed exploration and development company focused on Far East Russia last week announced the Company has received the last of its 2010 exploration programme results. A gridded soil geochemical sampling programme was completed over a 5.5 kilometre long area between the Maly Krumkon and Ikenskoe deposits, which includes the Gorni target located approximately midway between the two deposits. A near continuous, 3 kilometre nickel anomaly has been defined and links the Gorni target with the Maly Krumkon deposit. The intervening area and the approximately 800 metre long drilled Maly Krumkon deposit represent a structure approaching 4 kilometres in length. This anomalously mineralised area has been upgraded to a drill target. The drill target defined by the trenches and soil anomaly is three times longer than the drilled portion of the Maly Krumkon deposit. Amur has sufficient funding into early 2012 to fund the ongoing administrative costs and to undertake additional exploration in 2011 at Kun-Manie. Work continues with the Russian agencies to obtain the mining licence on the Kun-Manie project; expect some news on this over the next few months. With a Pre-Feasibility Survey that indicates an NPV of $84m, an increased resource potential, and funds that should result in significant exploration work, Amur is a highly attractive share.
Bahamas Petroleum (BPC 24.75p / £244.38m)
Bahamas has now completed the acquisition of 1120 km of long cable close grid 2D seismic survey undertaken to define drillable targets and resource potential in place in its southern licences. The seismic analysis will be processed by Spectrum over the next couple of months.
Beowulf Mining (BEM 48.75p / £77.90m)
AIM traded mineral exploration company which owns several exploration projects in Sweden announced that its drilling programme on its wholly owned Kallak South iron ore deposit is making progress despite experiencing harsh winter weather conditions. Assay results for the initial 10 (out of the planned 32) drill holes, totalling 951 metres, are now expected to be received by the end of February 2011 and, despite the severe winter weather conditions, drilling of the remainder of the total 3,500 metre programme and final assay results for all of the selected drill cores are still anticipated to be received during Q2 2011. Beowulf also announces that it has assumed the role of operator at its Ballek, copper-gold joint venture project from Energy Ventures Limited, its joint venture partner. Beowulf is currently in the process of setting up a new Swedish subsidiary in order to facilitate the potential future application for a mining licence or exploitation concession. Beowulf also announced that it had appointed Fred Boman as a Production Consultant. Beowulf has risen 7 pence since we wrote on the Company a month ago, as the market begins to appreciate that both deposits at Kallak are estimated to contain more than 600m tonnes of high quality iron ore.
Central Rand Gold (CRND 1.55p / £24.80m)
On 3rd February, the Company updated the market on the problem it faces with regards to the rising Acid Mine Drainage (AMD) problem. The South African Government consistently provided assurances of their commitment to a joint solution throughout 2010, with a decision expected in January 2011 but thus far no undertaking has been received. Recent heavy rains and flooding in the Gauteng province has exacerbated the AMD issue and accelerated the rise of the water table.
CRND, along with other affected mining companies, supports the first phase of the interim solution being proposed by the Government which involves the construction of a submersible pump station with the ability to pump 72 megalitres of AMD per day with the water to then be treated through the existing High Density Sludge plant at East Rand Proprietary Mines. The full cost of this project is estimated at US$26m with CRND’s proportionate funding contribution expected to be in the region of US$4m.
If there is no commitment to this joint project by the end of Q1 2011, CRND faces the very real prospect that it will be unable to access its reserves below 250 metres below surface by the end of this year.
Due to the uncertainty over the Government’s participation, the Company has adopted a prudent position with respect to its capital resources and operations.
The Company said in that announcement that further updates would be issued as they arose and on 7th February they announced that the Company, together with Mintails SA (Pty) Limited and Mogale Gold (Pty) Limited (collectively referred to as MSA) have identified a commercially beneficial opportunity arising from participating in a venture in terms of which CRND shall contribute gold bearing ore for processing at MSA’s metallurgical gold processing plant. We suggest watching CRND closely.
Cove Energy (COV 102.5p / £503.27m)
Cove Energy, the upstream oil and gas company, together with the operator Anadarko Petroleum Corporation, announces a fourth major gas discovery at the Tubarao prospect in the Rovuma Basin Area 1 block, offshore Mozambique. The discovery well encountered more than 110 net feet (34 metres) of natural gas pay and no water in a high-quality Eocene-age reservoir that is separate and distinct from the hydrocarbons in Anadarko’s three previous discoveries in the Offshore Area 1 of the Rovuma Basin.
Anadarko’s drilling efficiencies have been enhanced to the extent that this well was drilled in half the time of the first exploration wells.
Anadarko is the operator of the Offshore Area 1 with a 36.5 per cent working interest, Cove has 8.5 per cent. John Craven, CEO of Cove said “The high quality gas reservoir at Tubarao, located 16 miles south-west of the previously announced Lagosta discovery, confirms a new play concept and de-risks similar prospects in the block”.
Encore Oil (EO. 151.5p / £443.43m)
EnCore has added 20 feet of net gas bearing pay within the Tay interval and 14 feet of net oil bearing pay within the Cromarty reservoir section to the hydrocarbon column in the Catcher area. Although this is less than the market had hoped for it nevertheless indicates that Catcher North is part of the Catcher and Catcher East accumulation as pressure data, porosity and estimated oil-water contact are comparable. The results from the Catcher North appraisal well will be incorporated into an updated model to estimate the likely oil in place figures for the whole Catcher structure. The Galaxy II rig will be mobilised to the Burgman prospect in the near future.
Equatorial Palm Oil (PAL 28.75p / £34.84m)
We have written extensively on the progress being made on the joint venture agreement with BioPalm Energy Limited, which provides for an equity investment in Palm Developments, the Joint Venture Company, of which US$7.5m was due to come from PAL (via its Guernsey subsidiary) and US$22.5m from BioPalm Energy (which holds approximately 28.5 per cent of the issued share capital of PAL). Last week, the Board announced the full implementation of the JV and that monies amounting to US$22.5m have been received from BioPalm Energy Ltd which should help develop its c.169,000 hectare position at Palm Bay, Butaw and River Cess in Liberia. We remain optimistic about the Company’s ability to make the most of the opportunity and we look forward to operational updates in the near future.
Forte Energy (FTE 8.86p / £51.62m)
The uranium and rare earth metals company has commenced the process of re-assaying for rare earth elements at the Firawa project in Guinea and expects to obtain initial results towards the end of this quarter. If the results are positive, Forte will be able to calculate a maiden JORC compliant mineral resource for rare earth minerals at Firawa in the first half of this year.
Frontier Mining (FML 8p / £148.87m)
The AIM listed gold and copper E&D Company focused in Kazakhstan, announced the appointment of Greg Vojack to the board as a non executive director. Mr Vojack brings with him a wide range of experience as well as extensive knowledge of working in Kazakhstan where he has resided for the past 16 years. He also has considerable experience in helping to bring corporate governance changes to many joint stock companies in Kazakhstan. Furthermore, Frontier Mining announced a successful operational update from 2010. Substantial progress was achieved on all the company’s projects with Benkala in particular having accomplished several key milestones during the year. Ensuring initial production occurs on schedule at Benkala in 2011 remains the company’s primary focus. With a completed equity raise of $6m, $4m in loan acquired and an increased copper production target on the Benkala Project, things are looking positive for Frontier.
GGG Resources (GGG 28p / £40.72m)
The gold developer focused on Australasia provided an operational update, the highlight of which is that 29 new drill holes have been mineralised, bringing the overall total to 88 and of which 87 show mineralisation consistent with the current JORC resource model. Most interestingly, 22 per cent of mineralisation in the existing program extends beyond the current JORC estimates- an upgrade of this is due in Q2 2011. Such news is likely to be well received by the market and demonstrates clear value being generated from the mineralisation programme.
Herencia Resources (HER 4p / £50.44m)
The Northern Chilean miner is considering adding another project and has entered into a non-binding memorandum of understanding to acquire a 51 per cent controlling interest in an iron-oxide copper-gold system. The project is likely to be an open pit in a very attractive setting geologically and logistically. Three of seven drill holes completed by the current owner have intersected significant copper and gold mineralisation at shallow levels. If Herencia decides to enter into the joint venture, the Company will have to commit to drilling a minimum of 6,000 metres and making staged payments totalling $750,000 over a 30 month period.
Leni Gas and Oil (LGO 3.05p / £28.04m)
The Board of Leni Gas & Oil, an international Oil and Gas Production, Development and Exploration Company, announced the appointment of Mr. Steve Horton as a Non-Executive Director. Mr. Horton has extensive experience in the energy sector with a record of delivery in drilling and production operations..
The shares closed at 2.834p on the day before the announcement and the price reacted positively following the news of the appointment.
Max Petroleum (MXP 19.25p / £87.01m)
Oil and Gas explorer MXP announced last week that had agreed to raise $85min a share sale at 17p and restructure its debts to fund exploration at its licenses in Kazakhstan. The capital reorganization pushes out repayment dates for loans and convertible bonds by about two years, which will enable the Company to focus on its exploration, Chief Executive Michael Young said. The Company will add the cash to the existing cash from operations and its borrowing facilities to embark on a drilling programme that includes 8 exploration wells in the Caspian Basin, targeting up to 168 million barrels of oil and 2 exploration wells targeting c. 1 billion barrels of oil equivalent. It also plans to drill 10 appraisal and development wells at its Zhana Makat, Uytas and Borkyldakty licenses. It will start drilling the first of up to 4 deep exploration prospects in Kazakhstan in August 2011 and this operation will take about 6 months.
Motive Television (MTV 0.88p / £10.73m)
AIM listed digital television technology, software and services provider last week announced the appointment of Graham Loader as CFO, Group FD and Company Secretary and that Alistair King had stepped down as part time FD. Graham Loader has substantial international experience in multinational, multi site blue chip companies and joins from Western Union, Global Remittances where he was VP and CFO for the APAC Region. We continue to believe that the combination of disruptive technologies position Motive as a solution provider that can offer TV Anywhere, anytime to the industry.
Ovoca Gold (OVG 30.75p / £27.20m)
Ovoca has given an inferred mineral resource estimate for its Stakhanovsky gold project in Magadan of 350,000 ounces of gold. This is calculated from an inferred mineral resource of 9.1m tonnes at an average grade of 1.2 grams per tonne and a cut-off grade of 0.5 grams per tonne. The resource estimate was prepared by SRK Consulting using both historic data and data gathered by Ovaca. Drilling has covered only a quarter of the immediate area in which the geological mapping and grab sampling have returned encouraging results so further exploration potential is considered to be good. For this year Ovaca intends to continue exploring the deposit using bulk sample analysis and hopes to be in a position to register a gold resource with the Russian state authorities.
Patsystems (PTS 24.25p / £45.27m)
The AIM listed company that delivers tailored solutions to enhance derivatives trading performance and trade processing, announced a result of mixed performance ending December 2010. They have seen some notable sales success such as the new customers for its exchange system offering, tempered against the deferred sales opportunities for their risk product and the marginal growth in the trading systems business. The group continues to demonstrate high cash generation and profit resilience, which they expect to continue into 2011. Overall Patsystems commences 2011 with an encouraging sales pipeline that will provide them an opportunity to expand their geographical presence and grow revenues for each of their product offerings- especially in their global ASP offering, Patsystems Xconnect.
Plethora Solutions Holdings (PLE 7.75p / £4.21m)*
UK-based speciality pharmaceutical company last week announced a trading update of unaudited information following the completion of the financial year ended 31 December 2010. In addition, the Company also announced the appointment of Richard Horsman, previously CEO of Cybit Holdings plc, as a non-executive director of the Company and the appointment of Billy Hargan, previously General Manager UK at Specialty European Pharma Limited, as VP Commercial Operations. The Urology Company launched eleven products during the year, including prescription pharmaceuticals and consumer healthcare products, which was ahead of expectations. For 2011, the primary goal for The Urology Company is to grow revenues to a material degree so that the business makes a significant financial contribution to the Company’s results. During 2010 the Company received substantial payments from Shionogi for the reimbursement of costs incurred by Plethora in the development of PSD 502 and should receive milestone and royalty payments in due course. The results are expected to show total revenues of approximately £1.15m, broadly in line with market expectations and cash balances in excess of £750,000. We like the highly derisked model: speciality pharma products selling on the market coupled with blue sky upside from already partnered drug development programmes, at no further cost. Plethora is well funded and we believe will continue to provide good news flow in the short and medium term. We see recent share price weakness as a great buying opportunity.
Range Resources (RRL 10.5p / £131.40m)
Last week Range announced that preparations have begun on site in anticipation for the arrival of the team to perform the fracture stimulation on the Russell Bevly Well (Range 20 per cent interest) at the North Chapman Ranch Project in Texas. The fracture stimulation is expected to significantly increase hydrocarbon flow rates and recoveries from the well. It is anticipated that the team will arrive on site on or around 10 February 2011 and will then take around a week to complete the fracture stimulation operation. It is expected that the fracture stimulation will result in a significant increase in production. It is then planned that the team will return to potentially undertake a similar stimulation operation on the nearby Smith #1 Well in April. On the Company’s East Texas Cotton Valley play, where Range recently increased its participating interest to 21.75 per cent, preparations are being made to mobilize a rig onto the drill site for the Ross 3H well. Range and its partners expect to spud the well this month. Last week we commented how Range had been included in the FTSE AIM All Share Index. We believe that Range’s profile continues to be on the ascent amongst institutional investors.
Wasabi Energy (WAS 2.88p / £57.60m)
Further to the announcement of the contract win for FLSmidth last week, Wasabi Energy raised an amount of £3m at 2.7p per share for the purpose of providing the Company with additional financial resources to continue the rapid commercialization of the Kalina Cycle. Mr. John Byrne, Executive Chairman of Wasabi Energy, commented, “We are delighted that there has been such strong institutional support for the Company which endorses our own view of the significant opportunities available to Wasabi.” Having recently gained a 100 per cent ownership position in Global Geothermal Limited, the Company is making good steps in ensuring that it is able to maximise benefits from amounts being ploughed into the technology, and the winning of the contract for FLSmidth demonstrates its commercial application.
*A corporate client of Hybridan LLP
The Hybridan Small Cap Wrap is a weekly review of some of the most interesting small cap stories of the past week. Our review will usually be of those companies whose market capitalisations are less than £50m although we may occasionally cover larger companies.
02 February 2011
This week: Craneware gets a lift, broadening the Range, Scancell more than just skin deep and poppy the Coolabi cat
African Aura Mining (AAAM 167.25p / £143.61m)
The iron and gold exploration and development Company announced the detailed geological intercepts of its iron ore project at Nkout, Southern Cameroon. The Company completed its 4,191m core drilling programme on the Nkout property. The drilling confirms the occurrence of an east – west trending and concordant magnetite bearing bonded iron formation. Drilling has focused on the Nkout centre, making up 3km of the 20km licensed area. The extensions east and west will be part of a more aggressive drilling campaign in 2011. This should allow the pending resource estimate to increase and the resource category to be upgraded. These excellent drill results combined with the successful testing, bodes very well for the potential of the Nkout region.
Caza Oil & Gas (CAZA 50p / £76.99m)
Keep an eye on Caza who will report drilling results from its Windham prospect in Texas by the end of February.
Coolabi (COO 6p / £3.33m)
We write on this AIM listed company, focussed on the ownership and creative management of intellectual property assets, for the first time on news that they have signed four new licensing deals for its Poppy Cat TV series, which is to debut on Nick Jr in Spring 2011. Poppy Cat is a 52 episode series and the result of a co-production with King Rollo films, which animates the Macmillan book series that has sold over 2m copies worldwide. The licensing deals include book publishing for a new series of books by Macmillan, a magazine publishing deal with Redan Publishing to feature the stories in their magazines, a deal with Aykroyd and TDP Licensing to create nightwear merchandise and a contract with Jumbo Games to produce Jigsaws. Coolabi has a number of other brands under its umbrella that include Scarlett & Crimson, Purple Ronnie, and Bagpuss, The Clangers & Ivor The Engine, and whilst the last set of interim results (6 months to 30 June 2010) were a little disappointing we appreciate the efforts being made to drive this company forwards. We appreciate the pro-active approach to building the Poppy Cat brand, and we look forward to observing the response once the series goes live.
Craneware (CRW 579p / £150.34m)
Craneware, the provider of software to US hospitals to improve financial performance, provided a trading update for the 6 month period to 31 December 2010, in which it announced that revenue growth is expected to be 24 per cent whilst adjusted profit is expected to show growth of 35 per cent. The announcement is more so impressive when considering the uncertainty surrounding the US healthcare reforms. Keith Neilson, CEO of Craneware commented, “With the launch and first sale of our latest new product, Value Based Pricing Analyzer, and the announcement that Craneware was named the number one product supplier in the Chargemaster area for the fifth year running, we have further demonstrated our desire to innovate and continue to lead the Automated Revenue Integrity market in the US.” Though the picture for US healthcare reform is not entirely clear, the direction being suggested will result in hospitals being pressured into driving efficiency and reducing costs (40 million extra patients are expected to be treated by 2014, without increases in revenue from insurers). Craneware’s product range facilitates this cost-cutting by improving supply chain management and allowing hospitals to continue to provide high levels of patient care. Such benefits appear to be highly valued by Craneware’s clients based on the trading update.
European Nickel (ENK 19.5p / £45.26m)
European Nickel has issued 29.89 million new shares in a placing and subscription raising £6m. The proceeds will be used to fund the acceleration of development at the Company’s Acoje nickel heap leach project at Luzon Island in the Philippines.
Filtronic (FTC 35.75p / £33.20m)
Designer and manufacturer in the wireless telecoms market announced interim results for the 6 months to 30 November 2010. A difficult trading period was faced, with revenue for the period down 24 per cent to £7.3m and a loss before tax from continuing operations of £1.2m (£0.1m in the prior period). Apparent component shortages have contributed somewhat to the difficulties faced by the Company, and the situation in the near future looks to continue to be fraught with obstacles. Nera Networks AS, perhaps Filtronic’s largest customer, was recently acquired by Cergaon Networks Ltd and are thought to be looking to rely less on the components offered by Filtronic going forward. Long-term prospects are interesting, with the November 2010 acquisition of ISOTEK offering great potential (£4oom market for microwave filters in wireless base stations) for revenue growth from 2012 onwards, as will product diversifications by Filtronic in the Point-to-Point business. We keep an eye out for further operational updates and look forward to seeing how ISOTEK fully impacts the final year results in July.
Forte Energy (FTE 7.8p / £45.45m)
The uranium and rare earth metals company has appointed GBM Engineering to lead the metallurgical testing and process design project at the Firawa Uranium project in Guinea. Forte has also engaged SGS to undertake associated environmental and anthropological surveys that will eventually be part of the formal environmental and social impact studies that will be included in the pre-feasibility study and mining permit process. Forte has also announced assay results from another nine holes drilled at the A238 uranium project in Mauritania. The results demonstrate an increase in both thickness and grade from previous results from outside the “main shoot” area indicating the existence of a high grade zone. When another 1500m of diamond drilling has been completed the Company plans to assess the data and construct 3D models of the mineralised body prior to commencing a second phase of drilling that will target the main shoot.
Frontier Resources (FRGP 5.5p / £3.3m)
PLUS listed Frontier Resources, the hydrocarbon exploration and production Company, was awarded the licence for the Petroleum Exploration Block 34 in Zambia, which covers an area of 6,400 square kilometres and is based 150 kilometres from the capital Lusaka. Whilst there has been no previous hydrocarbon exploration activity in the area it is thought that it could possibly form an extension to the productive East African rift system, thereby representing a considerable opportunity for the Houston based company. Though the Company seeks opportunities to build its exploration business, it continues to maintain a number of oil and gas production assets (approximately 70) that bring in healthy monthly revenues to cover the US operational overhead costs. This recent news release demonstrates the Company’s long term plan is being firmly put into action.
Max Petroleum (MXP 20.25p / £91.52m)
Following the market update reported in the Small Cap Wrap of 11th January 2011, the company, an oil and gas exploration and development company focused in Kazakhstan, has released further information with regard to its UTS-1 well in the Uytas field. The Jurassic reservoirs in the well are of excellent quality, with porosity averaging 29 per cent but a section in the Triassic Formation was tested and found to be non-productive. The Company plans to drill three confirmation wells at Uytas over the next several months and has tendered for a shallow rig to drill the wells. These additional wells will give a clearer picture of potential reserves in both the Cretaceous and Jurassic formations. The Company intends to acquire a high-fold 3D seismic survey over the Uytas structure designed to image the shallow reservoirs in the field as soon as is practicable. The Company has also commenced drilling the ALTW-1 exploration well in the West Altykol prospect in Block E, the eighth of 15 post-salt exploration prospects scheduled to be drilled by the company on Blocks A&E, the total depth of the well will be 1,800 metres. If the drilling at the three confirmation wells comes up positive, the company is shows good potential.
Next Fifteen (NFC 82.5p / £45.78m)
We last wrote on this AIM listed public relations consultancy towards the end of October 2010 and this share has added £4m + to its market cap since then. At the AGM held last week, Tim Dyson, CEO of Next Fifteen, gave a reading update and said: “I am pleased to report that, with almost six months of trading under its belt, the Group has made a good start to the current financial year. We expect the interim results for the six months to 31 January 2011 to show good organic growth and improved profitability, boosted by a strong performance from our US technology and consumer PR businesses….The financial year 2011 is poised to be a significant year of growth for our Group with market expectations of double digit profit and revenue growth. The good start to the year and the positive momentum we are experiencing leaves the Group well placed to meet these expectations.”
Next Fifteen talks about digital and consultancy and believes that in its space there will be winners and losers depending on how one reacts to the digital market place. With clients like Google, YouTube, Visa, PayPal, and with a focus on the technology sector and on the US and Asian market place, as well as forays into new large markets such as India, we believe that Next Fifteen will firmly be one of the winners. The CEO talked about growing the spend of his current clients as well as winning new business by pitching a high level of digital content. We said it before and we say it again, that strong financials and the Company’s desire to ensure that its business is both operationally and geographically diversified represents a good strategy for Next Fifteen in this dynamic industry. Next Fifteen is well managed, with solid organic growth ahead and has proven itself in the business of acquiring and integrating good businesses. We look forward to the Company’s Interim results on 5 April 2011.
Range Resources (RRL 8.69p / £108.75m)
The dual listed oil and gas exploration company reports their commentary on performance ended 31 December 2010. Highlights include the production of 53k and 2,588 barrels at the North Chapman Ranch, Texas. This production comes from just the middle of three zones at the Smith Well and on the bottom of four zones at Russell Bevly Well. At the Company’s Georgia Project, of 68 of the identified prospective targets, 6 have been prioritised as being ready for drilling. Of these 6 structures, total gross un risked oil has been estimated at 728m barrels.
Subsequent to the quarter end, Monitor Energy announced that it has entered into a mandate to raise A$90m. Following successful completion of the raising, Monitor will look to acquire 90 per cent of SOCA Petroleum, of which Range already hold 10 per cent. More importantly funds will be used to accelerate development of SOCA’s three onshore licences, which will bring an immediate increase in production. Good news for Range! Another highlight of the quarter end was Range’s inclusion in the FTSE AIM All Share Index. This is a significant milestone for the company. It will result in increased exposure to AIM Index Funds as well as increasing the company’s profile amongst institutional investors.
Scancell Holdings (SCLP 74p / £11.80m)
The developer of therapeutic cancer and infectious disease vaccines announced a positive set of interim results for the period ended 31 October 2010. They highlighted the successful progression of SCIB1; Scancells lead vaccine for melanoma, which entered clinical trials in June 2010. In addition there was a successful raising of £2.5m in April 2010 with new and current shareholders. In this quarter end licensing agreements were secured with the National Institutes of Health for use of the melanoma antigens TRP – 2 and GP100 as key components of SCIB1 and with Cancer Research Technology – UK’s commercialisation and development arm to use a human antibody for the development of new ImmunoBody vaccines for any immunotherapy. The Company also entered into strategic collaborations with ImmuneRegen BioSciences to investigate the synergy between ImmuneRegen’s Homspera and Scancell’s ImmunoBody vaccine technologies. As well as this, Scancell also collaborated with Immatics Biotechnologies GmbH to explore the development of novel ImmunoBody vaccines for colorectal cancer. The company’s advancement over the period seems very good. The positive data from the SCIB1 can only significantly enhance the value of the business.
SeaEnergy (SEA 22.5p / £15.55m)
AIM listed SEA yesterday announced that it has agreed a further extension to the terms of an existing loan facility until the earlier of 31 March 2011, or completion of the SeaEnergy Renewables Limited sale process. The facility is provided by LC Capital Master Fund Ltd, a major shareholder in SeaEnergy and follows an announcement on 24 December 2010 that LC had agreed an extension to 31 January 2011. At this time £700,000 of the current facility remains to be drawn by SeaEnergy. LC has also agreed to increase the size of the facility by £500,000 to £4.3m. The Scottish Government has indicated that a Plan and Post Adoption Statement for the Scottish Territorial Waters Strategic Environmental Assessment will be published before the end of March 2011 and it will cover two of SERL’s offshore wind projects. We look forward to any news on the disposal.
StatPro (SOG 116p / £70.44m)
The AIM listed provider of portfolio analysis to the global asset management industry has announced a positive trading update. They confirm that the trading for the year ended 31 December 2010 was in line with market expectations, delivering good levels of profit and growing revenue. Continued strong sales of StatPro Seven, which is a comprehensive online analytics servicer to performance teams, with 44 customers signed up, meaning 30 per cent of StatPro’s customers are now accessing StatPro’s solution via SaaS, a 20 per cent increase from previous year, have helped to generate a sold profit margin. An increasing investment in StatPro Revolution (the company’s innovative internet based front office portfolio analysis solutions) has also been made. Since the launch of StatPro Revolution over 250 companies have signed up to the beta version, and the company is on track to launch the paid service in Q1 this year. The board believes in the potential of StatPro Revolution and wants to transform the business into a pure SaaS provider. To that end, the board has approved an additional £2m investment in this area during the course of 2011. With a solid sales performance in 2010, the commercial launch of StatPro Revolution in 2011 and a unique product set, the long term opportunities here are significant.
Sterling Energy (SEY 68.25p / £149.72m)
Since our mention in the Small Cap Wrap of 11th January, the company, which has oil and gas exploration interests in the Middle East and Africa, has updated further on their efforts to recover the drill pipe from the Sangaw North No1 well in Kurdistan. Since then they have recovered a further 280 metres of drill pipe and, with the remaining drill pipe now at a depth of 1,950 metres, further progress in recovering the drill pipe has not been possible and they have said that the well will now be side-tracked and re-drilled to 3,300 metres at which point casing will be run and cemented prior to drilling deeper into the potential reservoir section which is believed to contain hydrocarbons. The new configuration will allow the well to reach its original target depth and the company estimates that the re-drilling to the planned casting point will take around 45 days. While the company is working to resolve this situation, the share price has continued to drift.
Sunrise Resources (SRES 4.3p / £13.35m)
Diversified mineral exploration and development company announced last week that assay results from the first phase of drilling at its Lake Gold Project near Sudbury in Ontario, Canada, demonstrate that gold mineralization extends near surface beyond the pit limits and confirms that mineralization continues at depth below the mine workings. The best result of 17 metres grading 2.9g/t gold including 2.3 metres grading 16.1g/t gold within a 35 metres-thick interval grading 2.0g/t gold. Some narrow intervals showed grade of 55g/t gold. The Board expects the geophysical results to be available in early February and has already started planning for a second phase of drilling at Long Lake.
Tertiary Minerals (TYM 11p / £13.04m)
Diversified mineral explorer and developer has announced results from the resource definition drilling programme, completed at its Storuman fluorspar project in Sweden in late 2010, stating that all 14 drilled holes hit fluorspar mineralization of economic significance. They discovered wide intervals of fluorite mineralization suitable for open pit mining, up to 20.2 metres thick grading 11.2 per cent fluorspar from bedrock surface in Hole 10TS18. Publication of the maiden 1JORC Mineral Resource Estimate for the project is expected at the end of Q1. The results confirm that mineralization occurs in two main horizons – the “Upper Zone”, which is upper fine grained recrystallised sandstone and the “Lower Zone” which is a lower coarser grained sandstone. Positive drilling results bode well for Tertiary minerals future.
ValiRx (VAL 0.28p / £1.35m)*
AIM listed life science company with a focus on cancer diagnostics and therapeutics for personalised medicine announced that the sale (announced 23/09/10) of its Belgian subsidiary diagnostic development business, ValiBIO SA to Singapore Volition Pte. Limited is now complete with ValiRx being in receipt of all funds it is due to date under the sale agreement with Volition. In addition, all eligible expenses owed to the Company from the transaction have been agreed between the parties. ValiRx continues to retain its significant shareholding in Volition and in the future upside value and growth of the business and integration to date between the companies is progressing well. It is good to see that the ValiBIO disposal has worked well and that the deal concluded according to plan. The market also seems to appreciate the reminder with the shares up from Friday’s close by 7.84 per cent. The sale will ensure that ValiRx can concentrate the Group’s focus on its core therapeutic, targeted and personalised cancer therapeutic and companion products, whilst benefitting from and realising the value and revenue generation inherent in ValiBIO’s more peripheral R&D activities. ValiRx retains the rights over technologies and products currently under development including the HPV test in clinical validation.
ValiRx’s current share price does not adequately reflect the near term potential for its commercialized and growing diagnostics business and seems to discount the innate value of its drug discovery business. We think now is a great time to invest in this exciting Company. We like the model of product on the market generating revenues in the test kits and the more blue sky upside that its proprietary drug development programmes provide in the technology platform. ValiRx remains far from fully valued at these levels.
Wasabi Energy (WAS 2.85p / £57m)
The renewable energy company, which was granted AIM admission at the end of last year, announced that it has secured a contract with FLSmidth to implement its Kalina Cycle in the construction of a power plant within the cement industry in Khairpur, Pakistan. The contract involves the provision of front end design engineering, procurement and commissioning services of the technology, together with a project specific sub licence. At the time of admission, the bulk of the £4.9m raised was to be used to commercialise the Kalina Cycle Technology, and this recent announcement which is expected to reduce CO2 emissions by 31,000 tonnes per annum is a testament to its potential and the value being created by such an investment. A green light for Wasabi, we think.
*A corporate client of Hybridan LLP
The Hybridan Small Cap Wrap is a weekly review of some of the most interesting small cap stories of the past week. Our review will usually be of those companies whose market capitalisations are less than £50m although we may occasionally cover larger companies.